Friday, May 6, 2011

Trump's 'University' Accused Of Scamming Customers

Along with touting his wealth and business acumen, real estate mogul Donald Trump has long portrayed himself as an educator, who is ready and willing to impart the knowledge that can turn any motivated person into a multimillionaire.

On top of the millions who watch his prime-time smash hit, "Celebrity Apprentice," thousands have enrolled in seminars with Trump University in order to better learn his money-making real estate sales methods. The educational program, launched in 2005, promises mentorships that are “the next best thing” to being Trump’s apprentice.

In speeches across the country, the potential 2012 GOP presidential candidate touts the importance of education. Trump has decried the state of our public schools and mocked President Barack Obama’s academic credentials.

"I’m deeply and actively involved in Trump University because I firmly believe in the power of education and its function as an engine of success,” he wrote in“Trump 101: The Way to Success.” “I want to help people, and, simply put, the Trump University students want to be successful. I’m on their side.”

Yet Trump’s credentials as an educator may be undercut by the recent history of his so-called university. The for-profit institution is the target of aclass-action lawsuit in federal court and the attorneys general of six states are investigating numerous complaints about it.

Last year in New York, Trump University was forced to change its name by the Department of Education. State officials sent the mogul a tough letter saying that it was misleading for his company to use the term “university.” Several months earlier, the Better Business Bureau gave the program a D-minus rating. The BBB is also currently reviewing several complaints against the renamed Trump Entrepreneur Initiative.

Real-estate seminars like the one Trump operates have sometimes enriched thousands of motivated entrepreneurs, eager to flip houses and make extra money. But some high-profile hucksters have been indicted for fraud, putting the industry in a bad light.

“Generically speaking, these are modern-day snake-oil salesmen,” says Doug Heller, the executive director of Consumer Watchdog. He says that such “get-rich-quick schemes” use hard-sell techniques that play on people’s hopes and fears. Trump’s name recognition increases the lure and has the potential to deceive vulnerable people struggling in a poor economy into thinking that instant wealth is around the corner, he adds.

“With his TV show and even some of the kitschy products, the consumer loss is minimal," Heller says. "You’ll never got that hour of 'Apprentice' back but that’s a lot different than 35 grand. And unlike throwing away $35,000 at the Trump casino, where you know the odds, these conferences are sold as sure things.”

Since 2005, over 11,000 people have attended one of his high-profile real-estate seminars. These often feature 20-foot-tall posters of Trump, speakers blasting the O’Jays’ “For the Love of Money” and lecturers promising to impart “insider secrets” to those who are willing to fork over thousands of dollars. Trump’s lawyers claim that the seminars have a customer satisfaction rate over 95 percent.

Some former customers disagree. They claim that the courses are just expensive “infomercials” that provide “empty promises” at a cost of tens of thousands of dollars.

“The primary lesson Trump University teaches its students is how to spend more money buying more Trump seminars,” says a complaint filed in U.S. District Court in San Diego.

Tarla Makaeff is a former fashion designer from Corona del Mar, Calif. and lead plaintiff in the class-action lawsuit. Makaeff says that she was convinced to attend the seminars by ads featuring Trump. Three-quarters of the world’s millionaires “made their fortune in real estate," the promos boasted. "Now it’s your turn.”

But soon, Makaeff was pressured to raise her credit card limits so she could purchase the Trump Gold Program for $35,000, which promised “hand-picked” mentors and a year of training. Instead, she spent two days looking at real estate properties and a half day at a local Home Depot, after which the mentors “quickly disappeared,” Makaeff said. IIn addition, she claims the seminars taught her to snatch up cheap homes by using "bandit signs," which are ads placed along the side of roads -- a practice that is illegal in California and other states.

Her lawsuit alleges that Trump University's mentors and associates “guide students toward deals in which they have a personal financial interest at stake -- creating a severe conflict of interest, so that the mentors profit while the student does not."

Another plaintiff in the suit, Ed Oberkrom, a 66-year-old retired computer technician living in St. Louis, says that he and a friend each dropped $25,000 on a similar Trump program. It promised access to “exclusive” property listings and the guidance of mentors. But Oberkrom told The Huffington Post that the listings were available elsewhere online for $35, Trump University staffers gave him the brush-off, and he didn’t get his money back, due to a three-day window on refunds.

“It’s a fly-by-night outfit and I feel cheated,” he says. “What is really aggravating is that Trump is noted for real estate, and that’s what attracted me in the first place.”

TRUMP FIRES BACK

A lawyer for Trump strongly denies the allegations.

“It’s completely ridiculous,” says George Sorial, assistant general counsel for the Trump Organization. “This case has absolutely no merit and we’re confident that we can defeat this in court.”

“I thought today was great. I was very interested in some of the topics," she says in the August 2008 video. "The speakers were really good. It was nice.” Makaeff also lauds her mentor, describing how they recently rehabbed and flipped a property in Las Vegas, adding that “he’s great -- he’s really helping me work through things.”

Trump has filed a $100 million counterclaim for defamation against Makaeff. The suit says that she made defamatory statements about Trump University engaging in “illegal predatory high pressure tactics” and “blatant lies,” among many others. The organization alleges that such statements caused a “significant decline” in business, though Sorial declined to get into specifics.

The defamation counterclaim "is nothing more than a class intimidation tactic by a bully," replied Makaeff's lawyer, Rachel Jensen. "It's shameful that Donald Trump's so-called 'University' would sue one of its own students for a million dollars simply for expressing dissatisfaction to the Better Business Bureau and her bank challenging the credit card charges. The counterclaim adds insult to injury as it blames the victim of Trump's scam."

Some real-estate investors say that Trump’s seminars can be useful. “I’ve attended a lot of these seminars and Trump’s was above average,” says Adil Bagirov, an energy consultant in Alexandria, Va. “It wasn’t the most effective, but I learned some things, and I’ve been very successful,” he says.

Bagirov did, however, note that the industry is prone to fraud and that he’s met people who have “been screwed” by unscrupulous instructors.

Vulnerable people can be particularly attracted to such seminars.

One of Trump University’s customers was Maurice Clemmons, the felon who was notoriously paroled by former Arkansas governor Mike Huckabee in 2000 and ended up killing four police officers in Washington state in December 2009. After taking a 90-minute seminar, Clemmons became obsessed with Trump and the mogul’s advice, even selling his house to raise money to invest in distressed real estate, reported the Seattle Times. Shortly before going to jail for assaulting a police officer and raping a child in 2009, he signed up for the $1,495 three-day workshop and eventually sent his wife in his place.

“Who knows what the next day could bring?” Clemmons told her from jail. “Today, I’m sitting in here, looking at this wall. Tomorrow we could be multimillionaires.” He talked about how they would strike it rich and treat each other to Bentleys and a Mercedes-Benz. Even after his brother-in-law became disillusioned and called the program a “hustle,” Clemmons was still a believer and considered offering a postdated check for $70,000 to sign up the couple for the school’s gold program before his life completely spiraled out of control.

The school is under scrutiny in several states, including Texas. After getting 30 complaints about Trump University from the Better Business Bureau in 2008 and 2009, the state attorney general, Greg Abbott, initiated a probe into possible “deceptive trade practices." Early last year, his office sent a civil investigative demand letter to the company, requesting copies of documents, including real estate contracts negotiated by Stephen Goff, one of Trump University’s most prominent instructors. The Trump Organization ultimately decided not to conduct any seminars in the state.

Trump lawyer Sorial says that those complaints have been addressed and that the Texas attorney general never took action against the company: “If you took 11,000 students, you’ll find a handful that weren’t happy with their education,” saying that the same ratio occurs at Ivy League schools like Harvard University.